Catholic Church abuse claims were anticipated years before allegations were made

The Catholic Church had set aside tens of millions of dollars to compensate sexual abuse victims years before it was prepared to publicly acknowledge the extent of the problem and now has up to $150 million set aside to cover existing and future claims.

The Sunday Age can reveal the church's insurance company has allocated up to $150 million to cover outstanding and anticipated compensation claims,more than three times the amount believed to have been paid to victims to date.

This figure is likely to rise as victims continue to come forward amid hearings by the Royal Commission on Institutional Responses to Child Sexual Abuse.

Internal documents show the church's insurance company, Catholic Church Insurance Ltd (CCI), had warned the nation's bishops that the church was facing financial exposure to sexual abuse compensation claims as early as 1988 – more than seven years before the creation of the Melbourne Response and Towards Healing victim assistance programs in 1996.

Concerns about the church's liability led CCI to propose a dedicated sexual abuse insurance policy that would cover the church for alleged incidents going back to 1969.

"CCI's aim is to assist the church by providing protection in a difficult area and one which is increasingly being excluded by worldwide insurance markets. We intend treating this insurance as a special accommodation line for the church," CCI's then underwriting manager wrote to the bishops in 1990.

As church leaders continued to debate over the next two years how to handle what it referred to as the "special issue", CCI on its own initiative set aside $1.2 million.

The revelations are expected to raise fresh questions about Cardinal George Pell's knowledge about the extent of abuse after testifying before the Royal Commission in 2014 that he was aware of only "dozens of complaints" when the Melbourne Response was created in 1996.

Then Bishop Pell was a member of the bishops conference that was notified of the liability problem and ultimately approved the creation of a "special issues" insurance policy and compensation pool in 1991.

Under the scheme, CCI was authorised to pay out up to $1 million in compensation per abuser, to a total liability of $5 million. Over the next two years, the total cover was boosted to $15 million.

But as the scale of the problem became clearer – at least internally – CCI issued the church with a new one-year "Ethical Standards Liability" policy that increased coverage to $25 million and excluded payouts for alleged abuse occurring before 1976. Claims from before this date would have to be paid directly by the church.

The new policy was also implemented because CCI was experiencing problems in the early 1990s having its insurance exposure to sexual abuse claims underwritten by reinsurance operators, which is a standard risk management practice for insurance providers.

The move also came despite the hierarchy continuing to publicly downplay allegations in the early 1990s that the church was facing a massive sexual abuse scandal.

At the 2013 Victorian inquiry into child abuse by religious and other organisations, Bishop Peter Connors – former chairman of the Australian Bishops' Conference special issues committee – testified that the church's policy before the Melbourne Response was "admit nothing" and "never say you are sorry".

"I think that was the difficulty for bishops, because they were taking the wrong advice never to meet with victims and never to admit something had happened," he testified.

This stands in contrast to information that was circulating internally among the church hierarchy and CCI, with one internal document noting that a "significant number" of claims for damages for sexual abuse had already been received in the early 1990s.

In 1996, the church eventually bowed to mounting pressure by creating the Melbourne Response and Towards Healing programs, which were designed to provide counselling services and compensation to victims.

The Melbourne Response capped compensation payments at $50,000, which was eventually raised to $75,000. There was no cap for Towards Healing.

Cardinal Pell, the architect of the Melbourne Response, said the financial limit was set "based on justice".

"I would remind you that the cap that the Melbourne Response put on those payments was paralleled by the cap on the government's offer to the victims of crimes, which was then $50,000," he testified in 2013.

"In other words, our response was comparable to what was done right across the nation."

But the cap was unrelated to the amount of funds potentially available under the terms of the CCI insurance policy, leaving open the prospect that victims could have received far more compensation than they did.

In previously unreported testimony before the 2013 Victorian state inquiry into sexual abuse, CCI chief executive Peter Rush said that the insurance company did not set the so-called "cap".

"The application or otherwise of a cap is irrelevant to the application of the policy," he testified. "The policy is going to respond if there is a cap or if there is no cap."

CCI has declined to comment on the how much victims are eligible to receive under the church's current public liability insurance policies.

Figures for how much compensation victims have received vary widely.

The average payment – made once a victim signs a deed promising they will not sue the church – is about $36,100 in Melbourne.

Head of the Melbourne Archdiocese's finances Francis Moore conceded to the Royal Commission last year that it could afford to triple its payments to victims of clerical abuse without a significant impact on its bottom line.

The Royal Commission, using information obtained through its coercive investigative powers, estimates Catholic Church authorities have paid more than $43 million to victims in total since 1997.

But CCI has publicly reported that it paid $30 million in counselling and compensation claims for Victorian victims alone from 1990 to 2013.

The Sunday Age understands that CCI has earmarked up to another $150 million to potentially settle all outstanding and anticipated sexual abuse claims, which represents up to half its total insurance liabilities. The reserve is supervised by the Australian Prudential Regulation Authority.

One of the Royal Commission's tasks has been to design a national redress scheme for victims of all institutional abuse in Australia, proposing a figure of $4.5 billion.

Francis Sullivan, chief executive of the Truth, Justice and Healing Council, said that whatever form the redress scheme takes, "the days of the church investigating itself are over".

"There's too much confusion and too much opportunity for criticism of self interest being a dominant influence over payments," he told The Sunday Age.

"Given the history, religious authorities will pay what they have to pay, whether that's out of insurance or their own funds is up to them."